841.6176/84
The Chargé in Great Britain (
Sterling
) to the Secretary of
State
London
,
April 7,
1926
.
[Received April 20.]
No. 918
Sir: Referring to the Embassy’s telegram No.
372 dated December 4, 11 a.m., 1925,97 in which the Ambassador gave the substance of
his interview with Sir Austen Chamberlain concerning restrictions in the
export of crude rubber and other raw materials, and when the Ambassador
left with him a memorandum on the position of the United States
Government,98 I have the honor to enclose a copy, in
triplicate, of a note just received from the Foreign Office dated April
6, 1926, in reply to the memorandum.
I have [etc.]
[Enclosure]
The British Secretary of State for Foreign
Affairs (
Chamberlain
) to the
American Charge (
Sterling
)
London
,
April 6,
1926
.
No. A 1353/10/45
Sir: I have the honour to inform you that
the proposals contained in the aide-mémoire
which the Honourable Alanson B. Houghton was [Page 359] so good as to leave with me during our
conversation on December 3rd have received from His Majesty’s
Government the closest consideration.
- 2.
- I am not altogether clear whether the joint arrangement which
the United States Government have in view would aim at the
suppression of all action, even of a purely private character,
for enhancing prices, or be limited to an agreement on the part
of governments to avoid action calculated to foster and
encourage price fixing. If it is the former, I may say that
however desirable it may be that commodities should be
obtainable at no more than “competitive” prices, it is clear
that neither His Majesty’s Government nor the United States
Government are in a position to bring about this state of
affairs and that accordingly British consumers must be prepared
on occasion to pay more than the competitive prices for
essential commodities. Thus His Majesty’s Government cannot
unconditionally accept the principle that no more than
competitive prices should be obtained for such commodities as
this country and her colonies are able to supply in payment for
the commodities which they consume.
- 3.
- As I understand it, however, it is an agreement of the second
character that the United States Government have in view. On
this proposal I beg leave to state that His Majesty’s Government
fully appreciate the importance of reducing as far as is
possible the impediments of all sorts placed by Governments in
the way of international trade under present conditions. His
Excellency’s aide-mémoire refers only to
restrictions of production and exportation but looking at the
general question in the widest aspect it is evident that
difficulties placed in the way of import all the world over are
a prominent feature of the problem to which the United States
Government have called attention. His Majesty’s Government would
be glad to see any alleviation of these difficulties and would
accordingly welcome any understanding with the United States
Government which might conduce to that end.
- 4.
- If I say that in the opinion of His Majesty’s Government, it
is necessary to regard the question of high customs tariffs as
an integral part of the general problem, the examination of
which is suggested in the aide-mémoire,
it is because this problem raises wide economical questions and
cannot be regarded from only one angle but must be studied in
the light of all contributory phenomena. High customs tariffs
are one of the most important of these phenomena tending, as His
Majesty’s Government are convinced, to afford perhaps the most
powerful support given by governments to price fixing
combinations.
- 5.
- Ready as they are to study this problem with the United States
Government, His Majesty’s Government nevertheless feel bound to
point out that restrictions and charges, whether on the
importation [Page 360] or
exportation of goods, are now so world-wide and embrace such
diversity of ends that any set of general propositions relating
to them must almost necessarily be limited by such numerous
exceptions that the general propositions themselves may become
of somewhat doubtful value. In the case of export charges and
restrictions, as in the case of import charges and restrictions,
it is probably impossible to lay down rules which hold without
exception. The observance of the same principles cannot be
expected from a country whose revenue must, for a variety of
reasons, depend upon charges on exports, and from a country
which does not find it necessary or expedient to derive any of
its revenue in this way. Nor again is it easy to define what the
world’s policy should be, having regard to the different natures
of the articles of export to which the policy would relate. To
take the specific case out of which the American representation
on this matter has arisen, the rubber crop differs from other
crops in a number of important respects which have a bearing on
what the Government should or should not do in connection with
it. It is not an annual crop, like wheat or cotton, the area of
supply of which can be rapidly increased so that a reduction in
any one year which has proved to be excessive can be corrected
in time for the next season. Enterprise in rubber planting has
to look many years ahead and consequently it follows that the
planter’s losses or absence of profit over a long period may
result in a serious world shortage of rubber some years later
which no action taken when the shortage is felt can correct.
Consequently, there is an obligation upon responsible
authorities in the case of rubber supplies which is absent, or
at any rate present in a smaller degree, in the case of annual
crops. Indeed, the need for the adoption of some conservation
policy some time ago is already demonstrated by the high price
of rubber, in view of which it will be generally agreed that any
neglect on the part of the responsible authorities involving the
abandonment of plantations and the cessation of planting would
have been seriously detrimental to world interests.
- 6.
- It is, of course, impossible to argue that the present high
price of rubber is attributable solely or even mainly to the
operation of the rubber restriction scheme. It is due to the
great expansion in the world’s demand for and use of rubber and
the insufficiency of present supplies to meet that demand
adequately. That this is the root cause of the present position
needs no demonstration, particularly in view of the fact that
only about one half of the world’s supply now comes from the
restricted areas, and that the export from the restricted areas
is to-day very little, if at all, less than it was before the
restriction scheme came into operation. This special operation
has been referred to not merely because the present proposal of
the United [Page 361] States
Government arises out of it but also because it serves as an
admirable illustration of the difficulty of generalising on the
question of what should and should not be done in the matter of
export restrictions and charges.
- 7.
- Leaving, however, this particular question on one side, His
Majesty’s Government desire to state that, whilst they cannot
overlook the great difficulties of arriving at any tenable
propositions respecting the legitimacy of particular Government
policies in regard either to import or export restrictions, they
recognise fully that nothing but good can result from an
interchange of ideas about the problem raised by the United
States, not merely in the more limited form, but also in its
wider aspects as indicated above.
- 8.
- In this connection they desire to remind the United States
Government that a preliminary conference, at which it appears
possible that United States citizens may assist, will shortly be
held under the auspices of the League of Nations for the study
of international economic problems. As you are no doubt aware,
this meeting is to take the form of a preliminary conference of
unofficial experts from the various nations, and is intended,
under the guidance of the Council of the League in committee, to
prepare the ground for an international economic conference. It
appears not unlikely that the subject of price-fixing agreements
in international trade may figure amongst those to be considered
at this conference, which in any case can hardly fail to discuss
some of the larger questions referred to in this communication
and in the aide-mémoire.
- 9.
- I should add that His Majesty’s Government for their part
consider that the subsequent plenary conference should be one of
business and other interests, and that Governments should not be
directly represented or in any way bound by the recommendations
which, it may make.
- 10.
- Reference is made in the second paragraph of the memorandum to
the financing of price-fixing. I beg leave to inform you that,
as regards the financing of commodities, His Majesty’s
Government have never undertaken any responsibility whatsoever
(apart from war emergency measures). They are not in a position
to exercise any influence over the action of international
combinations by private traders and in particular they are not
in a position to discourage the issuer of loans by or on behalf
of such combinations, since no control direct or indirect is
exercised by His Majesty’s Government over the issue of loans in
the London market and it is the settled policy of His Majesty’s
Government not to intervene between would-be borrowers and
potential lenders.
I have [etc.]
(For the Secretary of State)
Robert Vansittart
